District 482 in Statutory Operating Debt

Members of the Little Falls School Board received a preliminary audit report for the fiscal year ending June 30, 2000, and received notice from the Department of Children, Families and Learning (CFL) that the district was officially in Statutory Operating Debt at their meeting Monday night.

The CFL requires that the district submit a written plan to the department by January 31, 2001, explaining how it intends to recover from the situation. According to the CFL, the district shows an operating debt of $108,048 for the year ending June 30, 2000.

Superintendent George Maurer told members of the board, “Part of the plan we submit to the state will include the budget cuts that have already been made. We’ll begin working on this process as soon as possible. If the plan we send is not accepted by the state, they will send it back until it is acceptable.”

Dr. Maurer specifically noted the impact the MARSS Audits—the pupil head count conducted by the state which uncovered reporting errors by the district for the 1997-98 and 1998-99 school years—had on the 2000 budget. “All of the debt owed to the state by the district because of the MARSS errors have been assumed in the 2000 budget. It’s fair to say when you take a good look at these numbers that the district would have been very close to breaking even financially for the 2000 school year. And, that was our goal for the first year of the recovery plan for the district.”

The drafted audit presented at the board meeting by Tom Koop, Certified Public Accountant from Larson Allen Weishair & Co. supported Dr. Maurer’s assertion that much of the district’s current deficit can be attributed to the MARSS Audit. “Essentially, the district’s General Fund is in the black by $10,746 which means you’ve come very close to breaking even,” said Koop. He did caution the board about the long road that lay ahead of the district in the recovery process. He strongly urged board members, “Once this recovery begins to take place, it is strongly suggested that the board works on rebuilding its Reserve Fund. Even if that means a modest amount every year, it should still be considered a priority once finances have been stabilized.”

Koop also informed board members about changes that will be taking place over the next few years regarding the method in which all government entities report their finances. “Within the next few years, it is expected that all government units will operate under a new financial reporting format. This will apply to school districts as well as other government agencies. They will be expected to conduct and report their financial audits similar to the way any other business is required to report its finances. This will even entail inventories in each building.”

Koop also suggested to board members that the district make a better attempt at segregating employee duties. “I am aware that in a district of this size it is not always possible for employees to have complete segregation in their job duties, but this is an area you might want to look at. Perhaps, a periodic review to consider increasing the segregation of duties within the accounting department would be beneficial to the district.”

Susan Prosapio, board member, was concerned about the $300,000 in special aid the district received from the legislature. “Apparently, since the CFL sent the district that money prior to July 1, 2000, the money was plugged into last year’s budget and helped off-set the MARSS debt. But, I’m concerned because I believe the board figured that special aid into this year’s budget. This loss could really have an effect on this year’s budget.”

Prosapio then requested an updated revenue report for the 2001 school year. “I would like these numbers before January 31, 2001, the alotted time for getting a plan to the state. I think this is necessary so we can present a clear picture to the CFL.”

Prosapio then directed several questions to Tom Koop. “I am curious as to why I am looking at a draft, and not a final audit, on December 18. Aren’t we required to get an audit to the state by December 31, 2000? I’m also concerned that we’ve now spent 45 percent more on this year’s audit than last year’s audit, and basically it’s still not completed.”

Koop responded to Prosapio’s inquiries, “There are several reasons why this audit has been delayed and more costly. Primarily, we were waiting for numbers from the state. Most importantly, the MARSS numbers. We really could not proceed without them. There were also some systems computer problems in the district which held the process up. Lastly, this is Mr. Hasz first year as district business manager. We have spent a lot of time bringing him up to speed on the requirements of this year-end process. Undoubtedly, it has become easier for him as he has become better acquainted with the process.”

At this time, there has not been any special meetings planned to discuss the Statutory Operating Debt. The next school board meeting is scheduled for January 8, 2001, at 7 p.m. in the Media Center at the Little Falls Community High School.

Blurb: “It’s fair to say when you take a good look at these numbers that the district would have been very close to breaking even financialyy for the 2000 school year.” Dr. George Maurer.